Hard Money vs. Personal Line of Credit for Rehab

[Chris Reichenbach]

I recently bought a 2 bed 1 bath in Kannapolis, NC. I bought into around $10k of equity with an appraisal of $170,000 and would like to rehab and refinance around the end of 2023 to get my money out and then buy another place to rinse and repeat the process. I plan on starting the bigger parts of the rehab around September so I have some time to plan things out, but I'm looking at an ARV of about $190,000 and putting in about $15-20k in rehab/updating.

I'm just looking for more information about whether to look at a hard money loan or use a personal line of credit for this. I know there's minimum amounts to borrow if hard money is used but I wasn't sure if a personal line of credit would work or if I would have to get a small business loan for the $15-20k amount?

If anyone has any insight or ideas I would greatly appreciate it!

[Jon Puente]

Hey Chris, 

I would use a personal line of credit, or just cash on hand to do the rehab. Hard Money right now will have interest rates upwards of 10-15%, especially if you are a new investor with little experience. 

The personal line of credit however might be a variable rate and could bite you long term, so just be careful how you go about this and make sure you are not overspending your way into this rehab (happens a lot more than you think).  I would even consider just getting a small personal fixed rate loan at like 7-8%, rather than variable rates or hard money. 

The goal is to keep the rehab as cheap as possible, while not borrowing high interest rate money for a long period of time.  

Great Question!